Geopolitics biggest business issue between US, China: Report

By Ovunc Kutlu

ISTANBUL (AA) - Geopolitics is the single biggest issue weighing down business sentiment in US-China relations in the long term, according to a report by the US-China Business Council (USCBC).

"Continued deterioration in the US-China relationship over the last 12 months has led to uncertainty, lost sales, and rising costs for more USCBC member companies than ever before," said the report. "Bilateral tensions, among other factors, are contributing to delayed or canceled investments in China."

"While very few firms plan to fully exit the China market, many companies are adjusting their China-specific business operations, strategies, and supply chains to mitigate the impact of increasing tension," it added.

The report said long-standing domestic policy issues in China are having an effect on American companies’ competitiveness, and the firms that conduct business in China continue to encounter systemic challenges around market access and barriers to investment, uneven regulatory enforcement, and rising compliance requirements, especially data security and privacy.

It noted that most companies remain profitable in China and recognize the country's market importance to their global competitiveness.

"However, the challenging domestic operating and geopolitical environments have cut into company profits and revenues, fueling record-high pessimism and causing companies to take a more cautious approach regarding future investments," it added.

The relationship between the world's two largest economies is the top challenge for American firms in China, followed by cybersecurity rules, export controls and sanctions, and competition with Chinese companies, according to the report.

"Our members overwhelmingly report that ongoing tension between the US and China, among other factors, has caused increased uncertainty in the policy environment, leading to missed sales opportunities and delayed or canceled investments," USCBC President Craig Allen said in a statement.

While China remains a top-five priority market for 74% of American companies, 90% of the firms believe that Chinese industrial policies will negatively affect their company’s market share in China in the next five years, according to USCBC.